https://www.engineeringnews.co.za

Famous Brands yields growth amid adverse trading environment

30th May 2016

By: Tracy Hancock

Creamer Media Contributing Editor

  

Font size: - +

While the current adverse trading environment is widely acknowledged and reported on, JSE-listed Famous Brands says it remains optimistic and enthusiastic about the opportunities presented by the food service industry in South Africa.

The company advised shareholders on Monday that South Africa would remain an attractive destination for global competitors, but having contended with international entrants for over 20 years, the group had the determination, experience and energy to continue to flourish in the challenging environment.

The JSE-listed branded food service franchisor, operating in Africa, the Middle East and the UK, reported a 31% revenue increase for the year ended February 29, to R4.3-billion from R3.3-billion in 2015, along with an operating profit of R792-million, representing 18% growth compared with the previous year’s R672-million.

Group strategic adviser responsible for merger and acquisition activity Kevin Hedderwick told Engineering News Online that the business was on track to achieve R1-billion of profit by the end of February 2018. “There are still lots of opportunities to take this business forward and grow.”

Famous Brands attributed its strong increase in revenue to healthy system-wide sales in the Franchise Brand portfolio and integration of new business in the Logistics and Manufacturing operations.

Looking at possible improvements in terms of the year under review, Hedderwick told Engineering News Online that the company took on two “really big pieces of business” last year. These developments involved commissioning frozen and chilled distribution at the Crown Mines Chilled & Frozen warehouse, in Midrand, and integrating Famous Brands’ pork product into the distributor Cater Chain Food Services business, in which the company acquired a controlling 75% stake last year April.

“The first six months was very challenging,” Hedderwick said in regard to Crown Mines, adding that Famous Brands underestimated the complexity of the frozen distribution business. However, he added that the company had learnt a lot going forward, with Crown Mines recovering in the second half of the year.

In terms of Cater Chain, the integration of the Famous Brands business proved more challenging than expected. “If I could do things over, I would have probably put one of our own managers in there sooner,” admitted Hedderwick, noting that Cater Chain still had its challenges, but there was some “nice early moment there now”.

Famous Brands said this integration of new high-volume, lower-margin business is reflected in the relatively lower group operating margin percentage. The operating margin for the period under review, the company’s fifteenth consecutive year of record turnover and profits, was 18.4% on the previous financial year’s 20.5%.

Further, the company yielded headline earnings a share of 541c, up 16%, declaring a dividend of 405c, an increase of 14%, while net asset value a share grew by 9.4% to 1 554c on the previous financial year.

Headline earnings a share improved by 16% to 541c on the previous financial year’s 467c. Net interest expense rose to R6.9-million from R269 000 in 2015, as a function of unwinding the discount related to the put-option liabilities recognised during the year.

Cash generated by operations before changes in working capital increased to R875-million, up 22% from the previous comparable period’s R717-million.

Working capital grew significantly by R156-million from the previous financial year’s R4-million, as a result of the acquisition of Cater Chain and 51% stake in Botswana-based Retail Group, as well as organic growth.  After changes in working capital, cash generated by operations increased by 1% to R718-million.

The group had net cash on hand of R6-million compared with R126-million in 2015.

The group’s 2020 strategic intent was to become a leading branded leisure and consumer product business in Africa and selected markets, through building capability and scale across the key pillars of the business. Famous Brands highlighted that its “rewarding performance” for the year under review was a reflection of the momentum which this programme had gained to date and demonstrated its potential for growth in the run up to 2020.

Famous Brands management, said the company, had identified a multitude of initiatives to continue building capability and capacity across the three pillars of the business - franchising, logistics and manufacturing.

In line with its acquisitive nature and in pursuit of Vision 2020, Famous Brands would continue to pursue further upstream manufacturing prospects and explore opportunities to grow its presence in the casual evening dining segment, as well as outside the traditional food service sector.

“We have built a phenomenal team of people at Famous Brands; a lot of credit must go to the leadership. We have always had a culture of high performance and I think that is manifesting itself in the numbers,” Hedderwick pointed out.

He highlighted that Famous Brands learned to be simplistic in the early days and converted into a fully integrated food services business whereby it not only participated in the front end with brands but had a complex and sophisticated logistics business and an expansive manufacturing business. “Those three [pillars] have all evolved over the 15 years, but you can’t get anything done without people.”

Having retired as Famous Brands CEO on February 29, Hedderwick had agreed to take the role of group strategic adviser responsible for merger and acquisition activity until the end of February 2017. His primary focus would be to ensure that the business did not lose its growth momentum.

Edited by Creamer Media Reporter

Comments

Latest News

An image showing a group of selected learners who are part of the City of Cape Town and the NBI's artisan skills development programme
City of Cape Town, NBI partner on artisan skills development programme
Updated 26 minutes ago By: Tasneem Bulbulia
Rand South African flag
Rand slips ahead of CPI, central bank meetings
18th March 2024 By: Reuters

Showroom

Hanna Instruments Image
Hanna Instruments (Pty) Ltd

We supply customers with practical affordable solutions for their testing needs. Our products include benchtop, portable, in-line process control...

VISIT SHOWROOM 
SBS Tanks
SBS Tanks

SBS® Tanks is a leading provider of innovative water security solutions with offices in Southern Africa, East and West Africa, the USA and an...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (15/03/2024)
15th March 2024 By: Martin Creamer

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.082 0.132s - 170pq - 2rq
Subscribe Now